Daily market review

United States

Major stock indexes advanced Monday as fading hopes for US fiscal stimulus and rising Covid-19 cases spurred a shift out of cyclicals back into mega-cap growth stocks. The Dow Jones industrial index rose 0.9 percent, the S&P 500 gained 1.6 percent, and the NASDAQ gained 2.6 percent.

The FAANGs led the day's gains with Apple soaring 6.4 percent ahead of the expected unveiling Tuesday of its 5G iPhone. Facebook rose 4.3 percent, Alphabet was up 3.6 percent, Nvidia rose 3.4 percent, and Microsoft rose 2.6 percent. Amazon rose 4.8 percent as its Prime Day sales start Monday night.

Growth and momentum stocks were bolstered as expectations for a US fiscal package dimmed amid opposition from Senate Republicans and negative comments from House Speaker Nancy Pelosi. Cyclicals lagged amid expectations for renewed lockdowns as Covid-19 cases have rebounded headed into the fall.

Among sectors, communications services and technology were Monday's leaders while energy and materials lagged the most. Apache, the oil services company, fell 3.7 percent and Dow Chemical fell 1.6 percent.

Among companies in focus, Twitter rose 5.1 percent on an upgrade at Deutsche Bank, Ford rose 5.8 percent on an upgrade at Benchmark, and Alliance Bernstein rose 5.6 percent on favorable coverage in Barron's.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.00 to US$41.79 while spot gold rose US$4.96 to US$1,923.36. The US dollar was mixed against major currencies. The US bond market was closed for Columbus day: the Treasury 30-year bond yield was unchanged at 1.58 percent while the 10-year note yield was unchanged at 0.78 percent.


Better Chinese economic data and rising Chinese markets helped European equities end mostly higher Monday. The Europe-wide STOXX 600, the German DAX and the French CAC all rose 0.7 percent, but the export-heavy UK FTSE-100 eased 0.3 percent.

Chinese markets rallied overnight on reports the government would stimulate development in Shenzhen and other cities. Markets also noted comments from ECB Chief Economist Philip Lane who said the bank would be just as aggressive as the Fed in boosting economic activity, which suggested a similar inflation overshoot. Investors are increasingly expecting the ECB to step up its large-scale asset purchases before the end of the year.

Rising European Covid-19 cases remained in focus with the UK, Spain, France, and Germany all considering new restrictions. UK markets underperformed as Prime Minister Boris Johnson was expected to announce new lockdowns, including pub and restaurant closures. In Brexit news, the UK and EU reportedly agreed to continue talks to limit the most disruptive aspects of a new-deal Brexit even if trade talks collapse.

Among European stock sectors, best performers included autos, technology, and household goods, while lagging were travel & leisure, oil & gas, banks, retail, and basic resources. UK hospitality firms suffered with Marston's down 5.0 percent after the pub chain threatened to challenge UK virus restrictions. Restaurant Group fell 8.7 percent. Landis & Gyr, the Swiss technology company, fell 6.4 percent on an earnings miss. On the positive side, Daimler rose 2.0 percent on an analyst upgrade.

Asia Pacific

Major Asian markets posted mixed results Monday, with strong gains in China and Hong Kong but relatively moderate moves elsewhere. The Shanghai Composite index and Hong Kong's Hang Seng index closed up 2.6 percent and 2.2 percent respectively after Chinese state media reported over the weekend a plan by the government authorizing economic reform, deregulation, and enhanced development in Shenzhen. Officials also indicated that Shenzhen would be a model for extending a similar plan to other major Chinese cities. Japan's Nikkei and Topix indices closed down 0.3 percent and 0.2 percent respectively, while Australia's All Ordinaries index advanced 0.5 percent.

Japan's private sector machinery orders (excluding volatile items) rose 0.2 percent on the month in August after increasing 6.3 percent in July, stronger than the consensus forecast for a drop of 1.0 percent, and fell 15.2 percent on the year after dropping 16.2 percent previously. Despite the month-on-month increase in both July and August, officials still expect orders to decline 1.9 percent on the quarter in the three months to September after they fell 12.9 percent in the three months to June.

India data published Monday showed a smaller contraction in industrial production in August and a further increase in price pressures in September. The index of industrial production fell 8.0 percent on the year in August after dropping 10.4 percent in July, with manufacturing output falling 8.6 percent on the year after a decline of 11.1 percent. India's consumer price index rose 7.34 percent on the year in September, picking up from 6.69 in August and moving further above the top of the Reserve Bank of India's target range of 2.0 to 6.0 percent. RBI officials left rates on hold at their most recent policy meeting held last week, arguing that the recent increase in inflation will likely start to reverse in coming months.

Looking ahead*

On Tuesday in Europe, German CPI, German ZEW survey, and the UK labour market are due. In North America, US CPI and US NFIB small business sentiment reports are on tap.

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